June 24, 2015

For many young professionals, retirement planning seems odd given that it is thirty or forty years away. But the more time you give yourself to save the better the likelihood of accomplishing those goals. Aside from starting early, here are four ways to max out your savings:

  1. Do not assume the 401(k) default rate is enough-based on recent surveys approx. 65% of companies have reported having auto enrollment in their retirement plans with a default contribution rate of 3% of annual income. Work with your advisor to understand the correct percentage to meet your goals. An easy tip is to simply increase your contribution by 1% each year.
  2. Do not leave free money on the table-all employers are different but common match rates are between 3%-4.5% with varying stipulations. At the very minimum you should contribute at least the matched percentage of your income in order to double your savings at no extra cost to you. Provide your employer plan documentation to your advisor so they can help direct you on how the plan works so you can maximize your benefits.
  3. Do not assume you need a 401(k) to save- if you do not have an employer sponsored plan, no problem. And if you do have one but would like to save more, work with an advisor to determine if you should open a traditional or roth individual retirement account (IRA). There are major tax differences which should be evaluated prior to funding.
  4. Do not be too conservative and diversify-this is likely twenty, thirty, or forty year money. Allow those hard earned dollars to work hard and grow for you. If there is a market correction then it is likely you will have time to make up for the losses. Work with your advisor to ensure you have the right mix of investments that will give you the best opportunity for long term growth.
Take the time to plan for your future. You cannot predict the changes, challenges or successes you will have. But if you have a plan to work with then you will have more flexibility and opportunity to meet the uncertainty that life brings head on.

Caroline Hill, Financial Advisor

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(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).